Why Talk to Customers? Nick Kolobutin
Why Talk to Customers?
What is a Startup? • A temporary organization in search of a scalable, repeatable, profitable business model • Startups are Risky – Greater than 90% of products fail today • Goal of startup is to validate its business model hypotheses (iterate and pivot until it does)
Approaches to Building a Product • “Maximize Chances of Success” – Robust product with all features – Problem: Feedback at the end • “Release early, and often” – Get as much feedback early, and as much as possible – Problem: Chase what customers think they want
Need More Than One Customer – Eric Tribe, CEO
“If you are not embarrassed by the first version of your product, you've launched too late” – Reid Hoffman, CEO
Types of Risk with our Clients • Customer/Market Risk – Product fit • Invention Risk – Technology feasibility
Traditional Product Development
Winners vs Losers • Winners – Comfortable with ambiguity, uncertainty, doubt, fear – Throw out traditional product management – Combine Agile Engineering and Customer Development – Search for a business model, turn unknowns into knowns – Recognize their startup “vision” as a series of untested hypotheses in need of “customer proof” – Get in front of customers early and often • Losers – Execute rigid Product Management methodology
• Process to organize the search for the business model
Getting the answers is easy. Asking the right questions is hard.
Who should develop the Business Model? • Founders, not employees • No room for “idea” people
How do I Find a Successful Business Model? • Hint: – It’s not in the office • The best way to search is for the founders themselves to get out of the building to gain a deep, personal, firsthand understanding of their potential customers’ needs before locking into a specific path and precise product spec.
Webvan Case Study • Goal to revolutionize $450 Billion grocery industry – Online ordering, same-day, delivery • Dream Team: – Over $800 million in financial startup funds – Backed by experienced VCs – Founder with track record – Hired Seasoned CEO – First mover advantage – Get “big” fast – IPO with market capitalization of $8.5 billion – Executed Business Plan to a tee
Webvan Case Study • Hired experienced executives from nations large grocery stores • Marketing builds sales demo, sales materials (websites, presentations, data sheets), hires PR Agency • Engineering builds product based on defined feature set • Automated warehouses built with conveyers and carousels integrated with an order- fulfillment software
7 Months After IPO • Bankrupt • No failure in execution of business plan • Did not listen to customers or discover customer needs • Revenues did not match forecast • No Pivot
The 9 Deadly Sins of Product Development • Assuming “I know what the customer wants” – A startup is a faith-based initiative built on guesses • The “I know what features to build” flaw • Focus on a Launch Date • Emphasis on Execution vs Hypotheses • Traditional Business Plans Presume no Trial and No Errors • Confusing Traditional Job Titles with What a Startup Needs to Accomplish • Sales and Marketing Execute to a Plan • Presumption of Success Leads to Premature Scaling • Management by Crisis Leads to a Death Spiral – Webvan VP of Sales example
Business Plans are Obsolete • No business plan survives first contact with customers – Only used to obtain funding • Failure is an integral part of the search for a business model
• Process to organize the search for the business model
“A problem well stated is a problem half solved. ” – Charles Kettering, Inventor Electric Engine Starter
Customer Discovery • State Your Hypothesis – Problem-Solution Fit – Test customer perception of problem – Identify customer’s need to solve it • Minimum Viable Product (MVP) – Show customers product – Incomplete products are okay! • A PIVOT is NOT a FAILURE
How to Hypothesize
How it Works
Put Yourself in Your Customer’s Shoes • A day in the life...
Market Research Broadly Defined • “ The systematic, objective, process of gathering, analyzing and interpreting information about a market, product or service to be offered for sale, and about the past, present and potential customers for the product or service ; research into the characteristics, spending habits, location and needs of your business's target market, the industry as a whole, and the particular competitors you face.” – Small Business Encyclopedia, Entrepreneur.com
Why Market Research? • Lack of a well-developed business model, including insufficient research on the business before starting it: 78% failure rate • 84% of small businesses claim money well spent on market research – 58% claimed they integrated findings into product development – Koester, E. (2009). What every engineer should know about starting a high-tech business venture . Boca Raton: CRC Press, p.44
Market Research
Market Intelligence Resources ICE PRACTICE LIFE SCIENCES CLEANTECH Pg 31
Tools • Social media dashboard to track competitors • A repository to get teams on the same page with competitive info, partners, market trends • Download competitors profitable keywords from AdWords campaigns
Primary Research • Test market with landing page and Google AdWords • Set up a web page in minutes, to test and validate your customer problem and willingness to pay
Case Study • Wanted to build his own Jelly Fish tank but would cost $25,000 worth of parts • Had a hunch others might want one • Created test website and spent $100 on Google Adwords • Sold a $25,000 jellyfish tank • Now sells units for $500
Blogging • Blog around topic, build followers, find early adopters • Put market research to use, become SME
Polling Post Product Launch Too!
Punchbeta • Real-time website analytics tool to see where customers are leaving your site
Who is an Ideal First Customer? • Earlyvangelist – Visionary customers who buy unfinished/untested products, fall in love with idea of product – Happy to pay for early access – Early or eager aceclerators of viral growth – Why?
Earlyvangelist Characteristics
Where do I meet these Earlyvangelists? • They are closer than you think! Network! • Tradeshows • LinkedIn • Via co-workers • Past colleagues
How to Win Support for your Idea? • Make it imperfect – Makes it less likely someone else will run with it and be comfortable presenting • Customers feel a part of the process • ‘Perfect’ solutions inspire critique
Minimum Viable Product (MVP) • Perfection by Subtraction • Build the smallest possible feature set • Agile Engineering, incremental product build
Remember this? – Eric Tribe, CEO
Value Proposition
Cold Calling • Use social media to turn cold into warm • Use industry associations • Find relevant and timely news they appeared in • Use relevant market research and stats • WIIFM • Ego Boost • Other’s Credibility - Media
Lessons • The search for a business model is at the front of the startup process • Goal is to find a repeatable/scalable business model and execute it • No customers, no business • Interact with customers early and often to save time and money • Ask questions!
Questions to Ask • Why customers don’t buy • Why did customers buy • It’s difficult when caught up to follow these principles, leverage outside organizations or people to hold you to milestones and these concepts
What the Innovation Centre can Do • Help identify the problem • Assist identifying customers • Provide outside assistance and fresh, honest perspective • Advisory Board Program
Additional Resources Steve Blank
Upcoming Events • Social Media Strategy – May 15th
Nick Kolobutin Commercialization Specialist 96 High Street, Suite 300 Thunder Bay, ON P7A 5R3 Twitter: noic_innovate Phone: 807-768-6682 facebook.com/NWOInnovation Email: nick@nwoinnovation.ca Supported By:
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